Are People Interested in Probabilities of Natural Disasters?

Abstract

Previous research has demonstrated that in naturalistic risky decisions people tend to have little interest in receiving information about probabilities. The present research asked whether subjects search for and employ probabilistic information in situations that are representative of natural disasters: namely, situations where (1) they have no control over the occurrence of a negative event and (2) there might be huge losses of physical and human capital. Pseudo-realistic scenarios involving risky situations were presented to 116 experimental participants. Based on the active information search paradigm, subjects were given only a basic description of the situation and had to acquire additional information from the experimenter. In addition to the main task, the individual risk aversion of participants was measured. We demonstrate that in pseudo-naturalistic scenarios involving natural disasters people tend to show more interest in probabilities compared to scenarios with generally more controllable risks. Moreover, this interest increases with an increase in the importance of the situation to the decisionmaker. The importance of the situation also has a positive influence on the thoroughness of information search. The experiment detected no connection between individual risk aversion and information search.

Overconfidence, risk aversion and individual financial decisions in experimental asset markets

“…The difference in the average number of safe choices taken by both genders is insignificant (Mann-Whitney Z = -0.452, p = 0.652, two-sided); this is in line with previous research findings (e.g. Holt & Laury, 2002;Michailova, Tyszka, & Pfeifer, 2016). The correlation coefficient between risk aversion and individual overconfidence implies no linear relationship between them (Spearman's Rho (30) = -0.095, p = 0.303, one-sided).…”

Decision-Making

“…Therefore, ambiguity lies somewhere between uncertainty (no information about chance) and risk (full information about chance). People largely prefer decisions under risk to decisions in ambiguity to decisions under uncertainty (Ellsberg 1961), as they prefer to have more information at hand, even if this information will not be used in praxis (Michailova et al 2017).…”

Preferences for Prevention: People Assume Expensive Problems Have Expensive Solutions

“…They were each paid $5 for their participation and could win additional money depending on their decisions in the experiment. These stakes are typical for experiments on disasters with student subjects (Del‐Ponte et al., 2017; Michailova, Tyszka, & Pfeifer, 2016; Milinski et al., 2008).…”